Big Building's Public Auction A Big Deal

Jim Spencer

So, how big a deal is it that Hampton's tallest building, the 14-story Harbour Centre, is scheduled to be sold at pulbic auction Dec. 30?

A spokesman for the owners of the downtown high rise says the foreclosure notice is just a negotiating ploy by the mortgage company.

Critics of Hampton's heavily subsidized downtown redevelopment say it's the beginning of the end of a boondoggle that will cost millions in public funds.

The truth lies where it usually does in a political controversy - somewhere in the middle.

A deal probably will be cut between the Harbour Centre's owners and the company which holds the building's mortgage in time to forestall the foreclosure.

But knowing that the owners had to be threatened is bad news for everyone in Hampton .

What can be said without question is that as soon as the city was put on formal notice with a registered letter that the Harbour Centre was going on the auction block, every City Council member should have been told.

They weren't. Councilman Ross Kearney found out about the foreclosure sale last Friday from Councilwoman Linda McNeeley, who found out about it from a reporter checking out a rumor.

``I found out about it third-hand,'' Kearney said. ``But there seem to be a lot of people who knew.''

And they knew, Kearney said, last Wednesday when the council held its regular meeting. According to Kearney, nobody said anything, not even in a closed executive session to discuss ``real estate matters.''

Kearney aimed his wrath at City Attorney Paul Burton for not revealing the foreclosure notice. Burton hasn't returned phone calls. Neither has City Manager Bob O'Neill.

Mayor Jimmy Eason said that the city's Redevelopment and Housing Authority received the foreclosure notice late Wednesday, that he learned about it from a Daily Press reporter Thursday and that Burton didn't get his copy of the notice until Friday.

Kearney said that when he called the city clerk to see if an emergency council meeting could be convened to discuss the Harbour Centre foreclosure, he got a call back from Eason telling him to calm down.

Eason said Kearney ``was under a misperception. He was trying to say everyone knew about this and he didn't.''

That wasn't true, Eason said, adding that the whole episode was blown out of proportion.

``It's close to being settled,'' Eason said late Tuesday. ``It's not going to be foreclosed.''

That's good news for the mayor, who is the guru of downtown redevelopment. The Harbour Centre is one of his creations. The city bought the land where the high rise sits for $1 million and sold it to the developers, a partnership headed by Armada-Hoffler Holding Co., for a $100,000 downpayment and a $1.1 million note.

Eason said the city now collects $237,000 a year in real estate taxes from the Harbour Centre and its parking garage. The building it replaced paid $7,000 a year.

On the other hand, since 1988 the city's leaders have guaranteed the building's owners about $900,000 a year in lease payments for rental space and the garage.

Hampton agreed to lease two floors of the building for five years, from 1988 until February 1993. The costs have fluctuated based on adjustments in rental rates per square foot, but on average payments have been around $400,000 a year.

That money paid for vacant space the first year. Then the city moved its planning, development and risk management offices to one of the floors. The other sat empty until tenants began subletting some of the space in February 1991, reducing the city's expenses by roughly $90,000 a year, according to Hampton Finance Director James Peterson.

The city also agreed to lease the Harbour Centre parking garage for 20 years for more than $500,000 a year, Peterson said.

Revenue from parked cars comes to about $100,000 a year, Eason said.

``To load up the cost of the building with the cost of the parking garage is not fair,'' Eason maintained. ``We had studies that said we needed a parking garage. The parking garage was going to be built whether it was at the Harbour Centre or not.''

But the garage was built at the Harbour Centre and now contributes to its deficit financing. Comparing current revenues from the Harbour Centre with current expenses, Hampton appears to be running roughly half a million dollars in the red each year on the Harbour Centre. And that doesn't count the $1.1 million in unrecovered land costs.

That money was supposed to come through an agreement under which the Harbour Centre's owners paid the city 30 percent of the high rise's operating profits until the building is sold or the note is paid in full. If the building is sold, the city is supposed to get 30 percent of the profit or $1.1 million, whichever is greater.

The problem is: Developers whose properties get foreclosed don't usually have operating profits. And properties sold at public auction usually go for fire sale prices.

So, how important is it to the people of Hampton when a lender threatens to foreclose on the city's tallest building?